Utility Company Saves $1M in ERP Maintenance Renegotiation

An SAP Case Study

Situation

One of the largest utility companies in the U.S. had a long and productive history with a major ERP provider. What started as solid foundation for a long-term strategic relationship had regressed into a highly transactional and “legalistic” relationship. Though the client was paying maintenance fees on several millions of dollars worth of software that it was not using, the vendor was unwilling to adjust those fees for the good of the overall relationship, instead pointing to the letter of the contract and adopting a “there’s nothing we can do” attitude. The challenges were:

Limited leverage due to longstanding, ingrained relationships

Inability to validate or effectively counter ERP provider’s positions on pricing and upgrades

Increasing cost of ownership due to sub-optimal contract structures

No solution for eliminating maintenance fees on “shelfware” and products not intended for use

Action

UpperEdge was charged with assessing license utilization and entitlements, evaluating the competitiveness of the overall commercial agreement, and developing a strategy for negotiating maintenance reductions and a new deal structure. Specifically, UpperEdge:

Reviewed, analyzed and documented complete contractual and license entitlement history

Identified and prioritized potential points of leverage and opportunities for improvement

Developed a comprehensive and effective negotiation strategy

Coached executive team members with precise talking points for key meetings with the ERP provider

Built a detailed and persuasive communication approach for clarifying and setting go-forward commercial expectations

Advised client prior to negotiation sessions with ERP provider

Provided client with substantiated commercial benchmarks for use in all discussions

Results

Utilizing strategies, insights, market data, and the execution approach provided by UpperEdge, the company was able to reduce its maintenance base by greater than $1M, while also establishing a Best-in-Class commercial arrangement to govern the next five years of the relationship. The tangible benefits included:

Established new and strengthening current executive relationships between the company and the ERP provider

Eliminated downstream exposure to increased support fees

Enhanced flexibility through new pricing and discount models and extended exchange periods for product and user licenses

Reduced cost of ownership based on customized user definitions and re-aligned new user allocations with organizational structure and actual user roles

Long-term relationship structure designed to eliminate hidden costs, lower cost of ownership for new deployments, limit unwarranted fee increases, and enable flexibility to address changing business and program needs